Newsletter

Dockworkers' strike looking more likely

Negotiations for a new contract covering dockworkers at Atlantic and Gulf Coast ports have come to an abrupt halt, with the possibility of an end-of-the-month work stoppage looming larger and sending shippers scrambling to find alternatives for their holiday cargo.

Talks between the International Longshoremen’s Association and the United States Maritime Association, which represents 14 Atlantic and Gulf Coast ports, dissolved Aug. 22, less than half an hour into what was to have been a three-day session.

ILA president Harold Daggett left telling the Journal of Commerce “It looks like we’re going to have a strike” when the current contract expires Sept. 30.

No new negotiations are planned.

At Georgia Ports Authority, executive director Curtis Foltz said his staff have been watching the developments for months, although he was quick to point out they don’t have a seat at the table.

Savannah, the fourth busiest container port in the country and second largest on the East Coast, already is seeing some shippers diverting cargo to the West Coast as a precautionary measure, he said, moreso after the recent negotiations broke down.

“I both hope and expect they will be talking again, preferably sooner rather than later, so they can either reach an agreement by October or agree to extend the deadline,” Foltz said.

Indeed, the West Coast may not be an alternative if a strike occurs.

Global Logistics News reports that Bob McEllrath, president of the union that represents West Coast port workers indicated dock workers there would stand in solidarity with their East Coast brethren, especially on certain issues.

“No one should listen to the recent hum of industry executives suggesting they know what dockworkers on the West Coast will or won’t do in support of our East Coast brothers and sisters,” McEllrath said in May.

“The fact is that we have their back in the fight to protect work and jurisdiction. Their fight is our fight.”

The ILA’s last coastwide work stoppage was in 1977.

Ripples of unease

Just the spectre of a strike can wreak havoc on the East Coast, Foltz said.

“Logistics supply chains don’t turn on a dime, so even if the issues are resolved fairly quickly, it could take months before all the business comes back.”

Page Siplon, executive director of the Georgia Center of Excellence for Logistics, agreed.

“Logistics is all about planning,” he said. “When Walmart wants Christmas trees in-store at the end of November, they start that process in June, not October.

“What everyone wants from their supply chain is to move faster, cheaper and, most important, reliably. But you can’t come close to that when you have to make last-minute decisions.

“That’s why something like this sends a ripple of unease through the entire supply chain,” he said. It’s like playing chess with billions of dollars in commerce and thousands of jobs.”

Asked about contingency plans at Georgia Ports, Foltz said there are none.

Savannah ILA president Willie Seymore declined requests for an interview.

A strike at the Port of Savannah could idle some 1,500 dockworkers, as well as short-haul truck drivers, stevedores, line handlers and other related workers.

In a Thursday memo to GPA’s approximately 1,000 employees, Foltz said “We are closely monitoring developments, including the possibility of a work stoppage by the ILA. If a work stoppage by ILA members actually occurs, the GPA anticipates that it will cease operations in the impacted areas during the work stoppage. However, we will expect all of our employees to continue to report to work for other duties as assigned.”

Looking for alternatives

The growing possibility of a work stoppage is beginning to make shippers very nervous, said Rhett Willis, president of Savannah’s D.J. Powers, one of the oldest Georgia-based freight forwarder and customs brokerage firms in the state.

“My phone has been ringing off the hook since last week,” he said. “Our customers are mostly large manufacturers who supply global markets, primarily other manufacturers. They are keenly aware of the situation and very concerned. There’s a lot at stake and not much wiggle room.

“When our customers can’t get their product to their customers there is a huge domino effect.”

Willis said the breakdown in talks so close to the contract deadline makes preventative measures difficult, although he has been advising clients to stockpile inventories in Europe so they can ship from there should a strike occur.

While cargo coming into the country would likely be diverted to ports in Canada or Mexico and moved by rail or truck into the U.S., there’s no practical Plan B for exports, he said.

“Georgia exports in particular would be devastated,” he said, noting that the state exports such perishable products as poultry and peanuts.

Georgia’s poultry exports alone constitute a $5 billion business.

Across the country, retailers are on pins and needles.

On Monday, the National Retail Federation urged labor and management to return to the negotiating table, saying retailers heading into the crucial holiday season will be forced to divert cargo elsewhere in a matter of days.

“We understand and recognize that there are tough issues that need to be resolved,” NRF president and CEO Mathew Shay said in a letter.

“The issue will only be resolved, however, by agreeing to stay at the negotiating table until a final deal is reached. Failure to reach agreement will lead to supply chain disruptions, which could seriously harm the U.S. economy,” he wrote.

“We are facing a critical time,” Shay said, noting that some retailers have already enacted expensive contingency plans to ensure that holiday merchandise will reach store shelves in time.

Those costs will likely be passed along to the consumer.

At Rayonier, a Jesup-based global forest products company that is one of the top 25 exporters in the nation, company president and CEO Paul Boynton is concerned.

“We have a great relationship with the Port of Savannah,” Boynton said. “They are an extremely efficient port and a critical partner.

“Losing that, even temporarily, would be a costly proposition for us.”

‘Everyone affected’

The economic damage of a strike could be devastating, especially for a port-dependent state such as Georgia, said Jeff Humphreys, University of Georgia economist and director of the Selig Center for Economic Growth at UGA’s Terry College of Business.

“Make no mistake about it, a strike will affect everyone, not just those directly connected to the port,” Humpreys said last week. “If you shop at Walmart, buy groceries or gas, need parts to repair your automobile, you will be affected.

The financial markets won’t be immune, either.

“Even a short term strike could cause some volatility — in the credit markets, the currency market, the stock market — and impact confidence,” he said.

“In Georgia, 10 cents of every dollar in sales and 8 percent of jobs — some 352,000 — are port-dependent,” he said.

“While we certainly wouldn’t lose all of those jobs, we do rely more on our ports than most states.”

Although Humpreys wouldn’t handicap the odds of a strike occurring, he was fairly certain of one thing — if it does happen, it won’t last long.

“An economy that is growing at less than 2 percent is entirely too vulnerable to any type of shock,” he said. “With ports accounting for 8 percent of our GDP, a prolonged port strike would tip the Eastern U.S. back into recession.”

Despite the proximity to the upcoming election, Humphreys said he would expect President Obama to invoke the Taft-Hartley Act, which would send union labor back to work for a 60- to 90-day cooling off period.

“At this juncture, a sitting president can’t afford to allow a fragile economy to dip back into a recession,” he said, adding the political and economic pressures that would come to bear on both sides to settle would be enormous.

“This is not really an environment where bigger wages and better packages would be expected — not with economic costs so high and confidence so low.

The sticking points

Why the sudden breakdown in negotiations?

According to the Journal of Commerce, attempts to negotiate a new six-year contract bogged down over management’s insistence on productivity and efficiency improvements, especially at the Port of New York and New Jersey, which U.S. Maritime Association chairman and CEO James Capo said has become the most expensive in the group.

Capo said he was “disappointed with the uncompromising stand the ILA leadership is taking in the negotiations” by defending what he called “archaic” practices, such as New York-New Jersey work rules that provide round-the-clock pay for a few hours’ work.

Daggett saw the issue differently.

“I thought we were doing OK until they dropped the bomb on us,” Daggett said, referring to management’s insistence on discussing productivity and efficiency at East and Gulf Coast ports. He said the proposed changes would eliminate decades of ILA gains and were unacceptable to the union.

Other key issues include overtime rules and container royalties, which are payments to union workers based on the weight of cargo received at each port.

Despite lingering concerns, Daggett said he would ask the Maritime Association for a final offer to present to the union’s 200-member wage scale committee, but he wasn’t optimistic.

“I expect they’ll reject it and vote to go on strike,” he said.

Late Tuesday, Daggett’s own local, which represents 1,200 of the 3,500 longshoremen at the Port of New York/New Jersey, voted to authorize a strike.

WHAT’S AT STAKE

The ports that would be affected should the ILA go on strike next month handled 20.7 million TEUs — or 20-foot container equivalents — in 2011, 48.5 percent of the total container traffic passing through U.S. ports.

The largest port on the East Coast, the Port of New York/New Jersey, handled 5.5 million TEUs or 12.9 percent of U.S. volumes in 2011. Savannah is next, with nearly 3 million TEUs, or 8 percent.

According to Alphaliner data, the total weekly capacity of container services calling at U.S. East and Gulf Coast ports is more than 287,000 TEUs, with Far East-U.S. East Coast routes accounting for 40 percent, while the Europe-U.S. East Coast routes account for another 27 percent.

THE PLAYERS

ILA

The International Longshoremen’s Association, AFL-CIO, is the largest union of maritime workers in North America, representing upwards of 65,000 longshoremen on the Atlantic and Gulf Coasts, Great Lakes, major U.S. rivers, Puerto Rico and Eastern Canada. Dockworkers on the West Coast are represented by the International Longshore and Warehouse Union.

According to James Capo of the U.S. Maritime Alliance, which represents management at the 14 deepwater ports along the East and Gulf coasts, ILA members coastwide average $124,138 a year in wages and benefits, “which puts them ahead of all but 2 percent of all U.S. workers. They earn an average hourly wage of $50, more than double the $23.19 average for all U.S. union workers. They also pay no premiums and minimal co-pays and deductibles for a health care plan that is better than most U.S. employers provide their workers.

“At the Port of New York and New Jersey, 34 ILA members make over $368,000 a year in wages and benefits; one of every three makes over $208,000 a year, not including annual bonuses based on the weight of container cargo,” Capo said. “These container royalties totaled $232 million in 2011 — or an average of $15,500 for ILA workers on the East and Gulf coasts.”

USMX

Founded in 1997, the United States Maritime Alliance, abbreviated USMX, is an alliance of container carriers, direct employers and port associations serving the East and Gulf Coasts of the United States. While serving as the representative of the management groups in master contract bargaining, the Alliance also articulates industry positions on regulatory and safety issues; oversees coast-wide training, retraining, certification and recertification programs and is responsible for administering coast-wide fringe benefit funds and programs.